LOS ANGELES -- President Bush Tuesday rejected Gov. Gray Davis' appeal for federal price controls on California's soaring electricity prices, prompting Davis to announce the state plans to file suit against the federal government to force it to act.
In a meeting with Davis, Bush offered to work with California to keep power flowing in the state, a departure from previous administration statements that California would largely be on its own to cope with price and supply problems this summer.
The president said, however, that while a federal cap on the wholesale price of electricity "may sound appealing" to those struggling to pay higher energy bills, such controls would lead to more serious energy shortages and higher prices.
Davis, a Democrat, said afterward that he and the president had "a fundamental difference" on the question of whether the Federal Energy Regulatory Commission should order "some form of price relief."
Davis has said he wants the commission to place a cap on the wholesale price of electricity, which Bush contends would make California's situation worse by increasing demand but not supply.
"We will file a lawsuit against the Federal Energy Regulatory Commission for failing to discharge its legal obligations," Davis said.
The 35-minute meeting with the governor was the centerpiece of Bush's first trip to California since he lost the state in November's election.
The president had signaled earlier in the day that he hoped it would lead to a de-escalation in the accusations that have been flying for months between Davis and the White House over the energy crisis.
The viability of a suit by the state against the federal government over the price controls issue was cast somewhat in doubt Tuesday by a ruling by a federal appeals court in San Francisco, which turned down a request by state Democratic lawmakers for a cap on the wholesale price of electricity.
The problems in California's power market, which had its roots in a troubled effort by the legislature to deregulate electric utilities, has imperiled the state's fiscal health, driven utilities to the brink of bankruptcy and given rise to a widespread public pessimism here that pollsters have found to be the worst in years.
The governor brought charts and graphs to his meeting with Bush to try to convince the president that failure of the federal government to institute price caps could have ripple effects -- especially in the technology industry -- that could tip the nation into recession.
Davis said California is headed toward spending $50 billion more on power this year, compared to two years ago. "It could well trigger a recession in California, which could drag down the American economy into recession," he said he told Bush.
Davis also released a letter from 10 prominent economists -- including Alfred Kahn of Cornell University, the architect of airline deregulation -- arguing that the charter of the Federal Energy Regulatory Commission requires it to "act to ensure that wholesale electricity prices are just and reasonable."
Since the political future of both Davis and Bush could depend on how far California's power disruptions spread, and where voters place the blame, Tuesday's meeting was designed as much for public consumption as it was for reaching any particular deal.
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